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Wii Hardware To Be Profitable At Launch
Next Generation reports on comments by Nintendo's Reggie Fils-Aime, stating that the Wii will be profitable out of the gate. It's been well-publicized that the consoles offered by Sony and Microsoft are subsidized by those companies. From the article: "Nintendo, however, has traditionally avoided the 'razor and blades' business model by selling its consoles above what they cost to make. Fils-Aime confirmed to Reuters that the Wii would carry on the tradition. 'We will make a profit on the entire Wii proposition out of the box -- hardware and software,' he said. 'That really is a very different philosophy versus our competitors. We are a company that competes only in the interactive entertainment space so we have to make a profit on every thing we do.'" The comment is undoubtedly meant to assuage analysts nervous about the relatively late release date and somewhat higher than expected price for the Wii.
To look at it from another angle, Sony and Microsoft's strategies are only profitable when they max out the number of consoles they sell. The larger their userbase, the more game profits that roll in. Both companies need to be number 1, and thus the struggle. Nintendo on the other hand doesn't need to be number 1 at all. By turning a profit on each console plus each game, they're safe as a niche player and even better positioned if it really does take off. For me, I'll be first in line to get a Wii based on the type of games available and the novelty of their design.
Actually Nintendo, which started out(and still is) a card manufacturer did branch out into a lot of other industries, but nowadays aside from a large stake in the Seatlle Mariners and owning a big chunk of Gyration Inc(where they got most of the wii controller technology from) Nintendo really doesn't own much else outside of the realm of games.
At one point, yes they did own a taxi service and "love hotels"(which are not brothels, they are basically hotels rented by the hour with the express purpose of having consenting adults do things in them which one would rent a hotel by the hour for)
Monstar L
This is really a misunderstanding of the issue here.
All three companies intend their console businesses to be profitable overall. While Sony and Microsoft clearly want to wipe each other out, none actually wants the businesses to make a loss at the end of the day.
Game console businesses have two sources of revenue (well, three now, with the recent addition of online services) - the major two being the console itself, and the game sales.
The expenses are the costs of making the consoles (including the costs of the console's development), and the costs of reproducing the games media together with the royalties that get paid to the developers to cover their costs and profits.
What Microsoft and Sony are doing is lumping the whole lot together. The problem for them is that the consoles cost considerably more to build than anyone would be prepared to pay. So they're selling them for a price that doesn't recover costs, and hoping revenues from game sales (and online services) will counter the losses they're making on that. This is called the razor blade model, as it reflects a supposed business model used by Gillette where the prices of razor blades were designed to offset subsidies given to razor blade holders.
Despite a prevailing wisdom that this is common in the games console industry, for the most part it's a recent development. Sega did it for one console, and failed miserably. Microsoft did this for the XBox, but there's no evidence that Sony or Nintendo did the same thing for the PS2 or Gamecube.
What Nintendo just said is that that's not the model they're using. The Wii is low cost because it's low cost, not because it's subsidized. While the exact hardware specs of the Wii are still unconfirmed, it is known that many developers received overclocked Gamecubes as development platforms early in the Wii's history. The graphics are designed to look good on standard definition TV sets (480 lines of resolution, or thereabouts.)
Nintendo plans to make a (small) profit on each Wii, and on the games. As such, each sell is guaranteed positive revenue. If it has to make more consoles and finds it sells fewer games than expected, they're not going to go into the red because of that.
Despite barely making a dent in sales last time around, Nintendo ended up being the most healthy in the games console business of all three players. Nintendo can follow this strategy for decades, be in "third place" every time, and, as long as they're realistic, they'll stay alive and healthy even if Sony and Microsoft, following the opposite strategy, end up close to death's door.
You are not alone. This is not normal. None of this is normal.
No no! It was because the receptionists kept telling them that the princess is in another castle!